April 24 (Reuters) - Wall Street's self-funded regulator said brokerage firms would have to conduct their own background checks on new recruits after critics pointed to gaps in disclosures by some brokers with checkered histories.
Financial Industry Regulatory Authority (FINRA), which has a database containing information on each registered broker's employment history, said it also plans to perform an initial check for financial problems, such as bankruptcies, for all brokers.
The watchdog will also conduct a search of publicly available criminal records of brokers who have not been fingerprinted within the last five years, it said in a statement on Thursday. (http://link.reuters.com/hep78v)
"I'm surprised it's not already required," said Jason Doss, president of the Public Investors Arbitration Bar Association, a group of lawyers whose members represent investors in securities arbitration cases.
The announcement by FINRA comes at a time when it is facing heightened scrutiny from legal groups and the media over the quality of its online disclosure system - BrokerCheck, a free tool to help investors choose a broker.
FINRA oversees 633,000 stockbrokers. Firms are already required to fingerprint newly hired brokers, whether they are first entering the industry or switching jobs.
FINRA sends the fingerprints to the U.S. Justice Department to check for arrest information in a national criminal database. But that search does not check for financial problems.
Morgan Stanley and Bank of America's Merrill Lynch unit already conduct their own criminal and financial background checks, spokespeople said. The process is typical among the largest brokerage firms, say compliance professionals.
The measures by FINRA on Thursday requires approval from the U.S. Securities and Exchange Commission, which oversees the regulator and changes to its rules.
(Reporting By Neha Dimri in Bangalore; Editing by Savio D'Souza)